December 4, 2011

GM Non-Story: Dealer Inventory Build-up Continues

GovernmentMotors0609Not that it took keen insight to catch it, but yours truly was one of a very few people who pointed out that General/Government Motors unduly dressed up its financial statements in advance of its late-2010 initial public offering by foisting an unreasonable level of vehicle inventory on dealers. The effect of this was to enable the company, which in accordance with general industry practice recognizes sales when it ships vehicles to dealers, to book an estimated $900 million in sent-ahead pre-tax profit largely not supported by dealer sales.

Contrary to the drawdown or at least level-off I expected after the IPO, GM, with of course virtually no establishment media coverage, has continued to push vehicles out to its dealers to what would appear to be potentially dangerous levels, as seen in the following graphic (HT to Zero Hedge for original):


Dealer inventories are 30% higher than they were on September 30, 2010, the end of the last full quarter before the IPO (624,000 vs. 478,000), and 62% above where they were at the end of 2009 (624,000 vs. 385,000). That would make sense if GM’s sales have increased by similar percentages, but they haven’t. Sales through November of calendar 2011 are 14% ahead of the first eleven months of 2010. Even if you believe that pre-IPO inventories were justified, it would appear that at least half of the new layer isn’t.

On a look-back basis, GM’s days’ sales in inventory is just shy of 100 days. On a look-forward basis, assuming the next three months’ dealer sales beat last year’s comparable three months by 10%, it’s 84 days.

Assuming a 37%-63% product mix between cars and light trucks (which is the sales mix so far this year), $5,000 in gross profit per car, and $12,000 in gross profit per light truck (consistent with the calculations from a year ago), GM has sent ahead another $1.3 billion in pre-tax profit since September 2010. The next paragraph would seem to indicate that light trucks are an even higher percentage of on-hand inventory, which would mean that the sent-ahead profit number is even larger.

To date only one story I’m aware of (Bloomberg, July 5) has appeared in the establishment press about GM’s extraordinary inventory buildup. Industry guidance on prudent inventory levels varies, but it generally suggests that they should be between 45 and 75 days, and definitely not well into the 90s. The Bloomberg item quotes an industry standard of 60 days, along with GM’s justification that theirs is appropriately higher (100-110 days for trucks alone) because of the need “to meet demand for different combinations of weight classes, cab types, engines and trim levels.” I don’t see how that gets you into the 90s, let alone triple digits, unless you have motives beyond having vehicles conveniently available to customers. The Bloomberg article notes that Ford manages to keep days’ sales at dealers of its truck lines below 80.

The danger in all of this is that if there is an economy- or gas price-driven sales slump, dealers will start resisting company pressure to keep ordering, and if successful, slow down GM’s shipments and ultimately its production lines. That’s a danger, thanks to establishment press non-coverage, about which the public is being kept almost completely in the dark.

Cross-posted at


BizzyBlog Update: The public is largely being fooled, but investors aren’t. GM stock has been scraping along at $20-$22 during the past two weeks, which is well over one-third below its IPO first-day closing price, and is approaching 50% below its 52-week high.

‘Arab Spring’ Update: Steyn ‘Wrong’ About Egypt’s Elections

In that he underestimated the strength the Muslim Brotherhood and Islamists would have at the polls, The One-Man Global Content provider has plenty of company.

But he was miles closer than anyone in the establishment press, as his latest column explains:

Back in February, I chanced to be on Fox News with Megyn Kelly within an hour or so of Mubarak’s resignation. Over on CNN, Anderson Cooper was interviewing telegenic youthful idealists cooing about the flowering of a new democratic Egypt.

Back on Fox, sourpuss Steyn was telling Megyn that this was “the unraveling of the American Middle East” and the emergence of a post-Western order in the region. In those days, I was so much of a pessimist I thought that in any election the Muslim Brotherhood would get a third of the votes and be the largest party in parliament.

By the time the actual first results came through last week, the Brothers had racked up 40% of the vote — in Cairo and Alexandria, the big cities wherein, insofar as they exist, the secular Facebooking Anderson Cooper types reside. In second place were their principal rivals the Nour party, with up to 15% of the ballots. “Nour” translates into English as “the Even More Muslim Brotherhood.”

As the writer Barry Rubin pointed out, if that’s how the urban sophisticates vote, wait till you see the upcountry results. By the time the rural vote emerges from the Nile Delta and Sinai early next month, the hard-core Islamists will be sitting pretty. In the so-called “Facebook revolution,” two-thirds of the Arab world’s largest nation is voting for the hard, cruel, bigoted, misogynistic song of Sharia.

Meanwhile, the establishment press saw Tahrir Square as the dawning of Egyptian democracy. As Eqypt moves seemingly inexorably towards becoming Iran II, don’t expect any of them to acknowledge how totally wrong they were, or how clear-headed people on the right like Steyn saw it all coming.

If anyone has a good counterargument against Steyn’s core view about where the world is heading — “A post-prosperity America will mean perforce a shrunken presence on the global stage. And we will not like the world we leave behind” — I’d like to hear it.

Sunday Off-Topic (Moderated) Open Thread (120411)

Filed under: Lucid Links — Tom @ 7:30 am

Rules are here. Possible comment fodder follows. Other topics are also fair game.


At PJ Media “FBI Criminal Informant Complicit in Brian Terry’s Death”) —

… a CI (criminal informant) working for the FBI found out about a smuggling run — from the FBI.

… The CI used this information to organize an ambush of the drug convoy. A source tells PJM that the FBI knew from wiretaps that the CI was using their information to set up an ambush.

The Drug Enforcement Administration (DEA) — through its own CIs and communications intercepts — was also aware of the planned assault.

Neither the DEA nor FBI warned Border Patrol about the expected criminal activity.

No wonder the butt-covering Department of Justice sealed the records relating to Brian Terry’s murder, and no wonder Terry’s parents blame Eric Holder and the DOJ for his murder.


Frank Luntz thinks Republican and conservatives should avoid using the word “capitalism” in favor of “free markets” and “economic freedom.” Luntz is wrong.

Luntz’s mission is to come up with messages that motivate supporters without offending fence-sitters; he’s vulnerable to being influenced by short-term bumps in poll numbers. As such, I think he’s wrong in his belief that the filthy, disgusting, incoherent, violent, capitalist-hating income redistributionists of Occupy Wall Street are going to have any kind of lasting impact on public opinion; in fact, the press is working overtime now to try to minimize the damage.


Bloomberg: “Canada May Save $6.7B by Exiting Kyoto Pact”


Student suspended for saying his teacher is “cute” (HT Hot Air). The teacher whined that it was a form of sexual harassment. Go to the link to see how old the kid is.

Seriously, something as stupid as this could be what got Herman Cain in bogus “trouble.”


Arianna Huffington: “Why Newt Must Run.” Written in 1995, before she saw a business opportunity in selling out.


Why they hate him (and hate is the right word) — “Tebow’s Religion, and Ours; His authenticity irks our secular, selfish culture.” “In short, people aren’t upset at Tebow’s God talk. They’re upset that he might actually believe it.”

Positivity: Irish pub owner reflects on God’s guidance in his life

Filed under: Positivity — Tom @ 6:56 am

From Alexandria, Virginia:

Dec 3, 2011 / 08:16 am

For Irish immigrant Pat Troy, “faith is everything.” At age 70, Troy is surrounded by his family and friends and owns Ireland’s Own, a thriving pub in Alexandria, Virginia.

He has also met every U.S. president from John F. Kennedy to Barack Obama.

But life has not always been easy for Troy, who grew up in a poor farming community in a small town in County Offaly, Ireland.

In a Nov. 29 interview with CNA, Troy recalled working hard as a child, both on a farm and for a nearby community of nuns.

The Catholic faith was important to him from a young age, he said, remembering how he would attend Mass with his grandfather every Sunday. He also developed a special devotion to Padre Pio and the Virgin Mary, whom he believes has been instrumental in his life.

“The Blessed Mother was always looking after me,” he said.

At age 16, he was recommended by his parish priest to be trained as a butler at Birr Castle, where he worked for five years, serving prominent members of Irish society and European royalty.

Things happen for a reason, said Troy, who sees Divine Providence in the chance encounter he had with a stranger in Ireland in 1962, who encouraged and helped him immigrate to the United States at age 21.

He also sees the guidance of God at work during the years that he struggled to support his wife and two children in Washington D.C. after he immigrated, working as an insurance salesman and later buying an Irish import store where he sold authentic Irish products and gifts.

Eventually, Troy bought a pub—which he named Ireland’s Own—and which would become a center for the Irish American community in the area.

As its reputation grew, Troy found himself meeting numerous famous actors, athletes and politicians.

These meetings were all overshadowed, however, when Troy and his wife had the opportunity to meet Pope Benedict XVI in Rome in September 2008.

Troy said that “nothing can compare” to the experience of looking into the eyes of the Pope and realizing that you are indeed “close to God.”

Today, Troy loves visiting and sharing his experiences with the people who stop in at his pub. He also sees it as an opportunity to help others.

Over the years, he said, he has had many chances to talk through people’s problems with them. In offering them support and advice, he often encourages people to pray about their difficulties. He believes that God has given him a special ability to speak and connect with people, and that he should use this gift to help others.

All Catholics are called to be “charitable people,” he explained, and we can all do something “in our own little silent way.” …

Go here for the rest of the story.